Senator Sam Dastyari will now take up a backbench position, following a whirlwind 48 hours of speculation over the Senator's positions concerning China, and Chinese interests in Australia.
A leaked audio recording from June last year revealed the senator made strong comments in support of China's territorial claims in the South China Sea.
Senator Dastyari says he discussed prominent issues in the Chinese media.
The New South Wales senator had previously downplayed the comments saying he "incorrectly" mumbled an answer to a question.
Senator Dastyari admits his position went against Labor Party policy, saying "While I do not have a copy of the transcript of the press conference, I understand a copy of those comments has been disseminated to media outlets. I have never denied the contradicting Labor policy was a significant mistake, and I resign from the Labor Party frontbench over it last year."
Opposition leader Bill Shorten told Senator Dastyari his position is untenable but said he accepts Senator Dastyari's word that he has never disclosed any classified information.
It comes after a report he had warned a Chinese businessman his phone was likely being monitored by security agencies.
Mr Shorten admits he has lost faith in Sam Dastyari and sacked him from two senate leadership role, "....do think his judgment was erroneous and he did make a significant mistake of judgement. And that's why I've sacked him again. So I think he's got a long journey to take before he can rebuild and that's why he's on the backbench." Opposition Leader Bill Shorten said.
Mr Dastyari also admits he made a mistake.
"I understand the importance of collective policy development and the consequences of breaching party discipline. I let myself down and my party down by contradicting party policy and I paid the appropriate penalty." Mr Destyari acknowledged
Prime Minister Malcolm Turnbull says Senator Dastyari should get out of federal politics altogether. "Dastyari has shown he does not put Australia first, and he does not owe his first loyalty to Australia. Sam Dastyari has shown that he is not on Australia's side. And it's time he got out of Australia's parliament." the Prime Minister believes.
However, Opposition Leader Bill Shorten has rejected calls to dump him from the party. Mr Shorten said, "I do not believe he's broken the law and I do not believe that he's a national security risk. And I have to say, based on my knowledge, I'm confident on my judgement."
Attorney-General George Brandis says that whilst he bears no personal grudge against Senator Dastyari, he has erred so gravely that there can be no sympathy for him on a professional level.
